Weekly Market Update October 18, 2023

Three large banks (JPMorgan, Wells Fargo, and Citigroup) kicked off earnings season last week, outperforming analyst expectations on the shoulders of strong economic growth and larger than expected interest income and revenue. However, the outlook was less optimistic as some bank loans are beginning to show stress as consumers have depleted their once-robust savings. Analysts expect overall third quarter S&P 500 earnings to increase 0.4% as of Friday, which would snap a string of three consecutive quarterly earnings declines. (Source: The wall Street Journal)

This week we'll get an update on retail sales, providing a status update if consumers are continuing the trend of spending in the face of elevated inflation. Real estate shifts into focus with September housing starts, building permits, and existing home sales reported during the week.

Blueprint Numbers

WAGES FINALLY CATCH INFLATION - Wages have been rising at an above average pace ever since Covid-19 stimulus was implemented in early 2020. However, on an inflation-adjusted basis wage growth was negative for 25 straight months. That trend appears to be ending, as September was the fifth straight month of positive real wage growth. (Source: Federal Reserve Economic Data)

RECORD INVERSION - The persistence of the currently inverted Treasury yield curve is starting to set records. The yield curve has now been inverted for over 240 days according to the spread between 10-year and 3-month Treasuries, the longest inversion on record. (Source: Charles Schwab).

SO MUCH FOR SAFE – Long-term Treasury bonds may appear safe on the surface, but the past three years have shown us just how risky they can be in the face of rising interest rates. Long-term government bonds with maturities over 20 years have lost 50% from their 2020 peak (bond prices move inversely to interest rates). For reference, the drawdown in stocks during the 2008 global financial crisis was 56%. (Source: Edward Jones) 

TAYLOR SWIFT: MOVIE STAR - Taylor Swift's concert film "Taylor Swift: Era's Tour" raked in an estimated $126 - $130 million over the weekend in global ticket sales, making it the sixth largest movie opening of the year. It is on pace to set the record for largest concert film opening in history, beating out Justin Biebers' "Never Say Never" film. (Source: The Wall Street Journal)

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